DM&E building

DM&E building / Elisha Page / Argus Leader

Three prominent downtown office buildings might see improvements this year through a combination of new tenants and ownership changes.

The Wells Fargo, Western Surety and DM&E buildings are located within a two-block stretch of Phillips Avenue and are in various stages of redevelopment.

The Wells Fargo building on the northwest corner of Ninth Street and Phillips Avenue was sold last year by a California investor.

The new owner, RJ Johnson Plaza I LLC, is led by South Dakota native Roland Johnson.

“He had moved away to Minnesota years ago and has come back,” said David Shelton, the broker who represented Johnson. “He has a varied background from farming as a young boy to investment properties in South Dakota, Texas and Minnesota.”

Johnson was attracted by the downtown building because it’s a landmark property, Shelton said.

“It’s probably one of the best-known properties in Sioux Falls, so that was important, and … the tenant, Wells Fargo, was a major interest.”

Wells Fargo occupies 80 percent of the building and has been the main tenant since it was built in 1973.

“It’s a good location,” said Dan Murphy, the bank’s regional president. “It’s important to the downtown community, and we’ve always understood that. And it’s important to our customer base, especially with the business community.”

Murphy said he met with the new owner and improvements are being planned.

“They realize the building was dated in certain respects, and they were anxious to bring it up to spec,” he said. “By that, I think they meant heating, air conditioning, ventilation, lighting, those kinds of things that they would take the time and money to bring it up to speed because they saw the building as a great opportunity to grow in Sioux Falls and as the downtown area expands.”

The bank owns the adjacent parking ramp and some surface parking spaces but has put them on the market.

The other tenant, law firm Murphy, Goldammer & Prendergast, LLP, has leased space from Wells Fargo since the mid-1970s, partner Vance Goldammer said.

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The firm, which has eight attorneys, has no plans to leave the building once its lease expires.

“I think it’s a great location,” Goldammer said. “I prefer downtown, generally, and for us as a law firm, the courthouses are about equidistant.”

Across the street, the former Western Surety building is being renovated by a new ownership group that includes Lloyd Cos. and Hegg Cos.

DocuTap, a electronic medical records software company, plans to move its 150 employees into the building this summer and anticipates doubling its staff there.

There’s 10,000 square feet left on the first floor that could be subdivided.

Craig Lloyd, CEO of Lloyd Cos., said the developers are looking for a restaurant and have talked to several operators, “but it’s hard to get excited about a restaurant in December or January.”

The nearby DM&E building also might see new life soon.

Canadian Pacific Railway, which owns the building, recently solicited interest about buying or redeveloping it from several area brokers and developers.

One of them, Michael Bender of Bender Commercial Real Estate Services, said proposals included an idea to turn the building into apartments.

It’s more likely, though, that it will remain office, he said.

“It’s worth more as an office because with multifamily you will gut the building and start from scratch,” he said.

A few railroad employees work in the building, but the rest of the 48,000 square feet is vacant, Bender said.

Lloyd also was among the prospects for redeveloping the building and said the top three floors have potential as office space.

“I’d put a new face on it,” he said. “And the main floor, I think, has got great potential for a restaurant, a boutique shop and more decks all the way around the main floor.”

The building’s underground parking and proximity to the Big Sioux River make it appealing, Lloyd said.

“It just needs to be reconfigured and redeveloped and re-envisioned, kind of like the Western Surety building,” he said. “It needs somebody to reinvigorate it.”

Andy Cummings, a representative of Canadian Pacific, said the railway is reviewing its options but didn’t provide a time frame for a decision.

Interest in all three buildings shows an overall strengthening of the downtown office market, Bender said.

“You start looking around and there’s not a lot of large chunks of office space,” he said. “I think there’s going to be stronger demand than people realize for downtown.”

Lloyd said he’s seeing the same thing.

“The interest in the office market has increased drastically in the last eight months,” he said. “Our other properties are filling up, and we’re getting a lot of good reception. I think people are hiring. I think businesses are expanding.”